December 08, 2000, 1:57 PM — EVEN BEFORE DOT-COM fever reached its height, hiring managers at established
companies in need of technical talent faced the stiff challenge of losing their
employees to the lure of start-ups. In today's hotter market, many IT recruiters and
managers are taking a close look at start-up compensation differences.
The InfoWorld Compensation Survey found that on average, individuals working for
start-ups are earning higher salaries, and many more are making six-figure salaries
than those at established companies. However, the survey also found that those at start-
ups are experiencing more significant salary fluctuations, such as salary reductions
and higher-percentage pay cuts, than those at established companies.
Still, most recruiters and hiring managers agree that the overall impact of higher
start-up salaries has created a hiring and retention challenge at established
"This is definitely creating a challenge for recruiters as well as for mature
companies," says Kathie Lucas, CEO of Lucas Consulting, in Scotts Valley, Calif. "We
typically see $5,000 to $15,000 higher salary [offers] from the start-ups. These pre-
IPO companies have to do whatever it takes to get the right talent or they risk not
getting their next round of funding and/or not getting their products to market on
Another reason many start-ups offer higher salaries is that that they are also
competing for attention among a crowd of other fledgling ventures.
"There are so many start-ups that they have to be competitive if they want to draw
somebody on board," says Kara Gray, co-founder of Preferred Solutions, a recruiting
company in Las Vegas. "Who's going to go to a company they've never heard of unless
they have a strong salary? [Newer start-ups] almost have to do that."
Good hires are so important to the success of a start-up that investors such as
Advanced Technology Ventures, a venture capital firm in Waltham, Mass., that
specializes in financing high-tech start-ups, often take a keen interest in a start-
up's employment picture as part of its investment strategy.
"Anything that affects the ability to hire and retain people is critical to us as
investors," says Michael Frank, general partner at the venture capital firm, who gets
involved in everything from compensation issues to hiring for the start-ups he is
Frank believes a company's work team is key to its future success: "That's more
important to us than the market the company is in."
Not all start-ups offer higher salaries as an initial lure, yet many IT
professionals still bite. For most that do, it's often because of the entrepreneurial